Evaluating the effectiveness of inter-regional trade and storage in Malawi's private sector maize markets

This paper evaluates the effectiveness of the private sector maize marketing system in Malawi using threshold autoregression models. Two dimensions of maize market performance are evaluated: (1) inter-regional trade and spatial price transmission; and (2) storage and seasonal price relationships. In both cases, threshold autoregression models which account for nonlinearities predicted by economic theory are applied. Results indicate that spatial price transmission and seasonal price patterns in private sector maize markets in Malawi are generally consistent with long-run competitive inter-regional trade and storage behavior, and that in most cases shocks to long-run equilibrium are arbitraged away quickly. This suggests the private sector in Malawi is generally doing a good job of transporting maize from surplus to deficit regions and smoothing maize consumption between harvests.